Mergers & Acquisitions

Resources: Glossary

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The process of adjusting, normalizing, or recasting a business’s financial statements to determine the true earnings (i.e., SDE or EBITDA) of a company.

See Also



The process of normalizing financials is also used so the earnings of a business can easily be compared with the earnings of other businesses. Most business owners manage their small businesses with the goal of minimizing taxable income by deducting expenses that are not directly related to the business’s operations. For this reason, it is often necessary to adjust the financial statements by “adding back” these expenses in order to show potential owners the actual cash flow available.

Related Resources

Adjusting Financial Statements: A Complete Guide

EBITDA | Definition, Formula & Example – A Complete Guide

Seller’s Discretionary Earnings (SDE) | Definition & Examples

Should I use SDE or EBITDA to value a business?